As the luxury sector sees a global slowdown, Singapore, one of its key markets, is being impacted by the slow return of Chinese tourism.
While high-spending Chinese visitors are returning to some markets, including cities like Paris and Milan, “the recovery in tourist spending on personal luxury goods overall is uneven and the effects of the pandemic are still very visible across some key luxury shopping destinations like Singapore,” said Fflur Roberts, head of luxury at Euromonitor International.
Total international luxury shopping on personal luxury goods, while booming post-pandemic for some brands, still remains at only 74 percent of its 2019 peak. It is not expected to reach full recovery until 2025, with much of the fall being attributed to the absence of Chinese tourists. “Slower than anticipated spending growth is expected in some key destinations like Singapore, that were traditionally dependent on Chinese tourism spending,” Roberts said.
Despite that cautious outlook, retail sales of luxury goods in Singapore increased by 11 percent in 2023 in current terms, to a total of 12.4 billion Singapore dollars, or $9.1 billion, according to Euromonitor. However, a record-breaking money laundering case in the city state, involving accused Chinese nationals, could potentially dampen demand in the short term for luxury goods as high-net worth individuals could avoid attracting unwanted attention.
Singapore authorities have started sentencing 10 Chinese nationals in the 3 billion Singapore dollar, or $2.2 billion, money laundering case. Multiple locations across the county were raided in August 2023 by local police to arrest the accused for allegedly laundering proceeds from overseas criminal activities. Three out of the 10 have so far been sentenced to jail time, fines and the forfeiting of assets, with the money laundering being linked to funds derived from illegal Chinese gambling rings. Some of the group are already wanted by Chinese authorities.
Chinese national, Su Wenqiang, the first of the accused to plead guilty in the money laundering case, agreed, as part of a plea deal, to forfeit assets worth more than 5.9 million Singapore dollars, or $4.3 million to the state, including a pink Delvaux bag worth SGD 4,100 ($3,010), a green Moynat bag worth SGD 5,780 ($4,250), a white Prada bag worth SGD 1,305 ($960), a Tiffany & Co. bracelet worth SGD 6,200 ($4,550), a pair of Dior earrings worth SGD 540 ($400), a Graff diamond ring worth SGD 9,450 ($6,940) and 38 luxury items including handbags, jewelry and watches worth a total of SGD 396,000 ($290,880).
The case sent shockwaves through the country, which is known for its safe and stable governance and attracts foreign investment through tax incentives and exemptions. It also raised questions on the effectiveness of Singapore’s existing measures to detect and counter money laundering activities and if additional measures are needed.
The revelation of such high-end luxury purchases in the money laundering case shined a spotlight on luxury spending in the city state and led to concerns that the under-regulation of luxury goods could be exploited to launder money. Singapore is tentatively due to have its anti-money laundering practices evaluated in 2025 by the Financial Action Task Force, an intergovernmental organization.
The case could have a longer lasting impact on luxury shopping in the city state if new regulations on the purchasing of high-value luxury assets are deemed necessary. Second Minister for Home Affairs Josephine Teo said in Parliament that Singapore’s anti-money laundering requirements comply with international standards set by FATF.
“A number of the suspects had purchased high-value assets such as luxury cars, bags, liquor and ornaments. These were among the assets that were seized, or issued with a prohibition of disposal order,” Teo said. “They are currently not regulated unlike, for example, precious stones and precious metals.”
The FATF Recommendations are a set of international standards, which the organization suggests countries should implement through measures adapted to their particular circumstances. Teo stated, “We will examine if Singapore needs to extend anti-money laundering requirements to new classes of assets, beyond what FATF has recommended. This has to be evaluated carefully so that we do not end up unduly inconveniencing legitimate businesses and customers.”
Prosecutors in the cases have said that a strong message needs to be sent to show that money laundering is a serious offense and to protect the country’s reputation as a financial hub.
Singapore is home to more than 300,000 people with a net wealth above $1 million. This number is set to increase to more than 400,000 people by 2030, according to Euromonitor International.
Still, any impact from the money laundering case on luxury spending is likely to only pause, not stall, overall spending, observers believe.
“Whilst in the short term the ongoing sentencing and fallout of the money laundering case may have some impact on spending habits on luxury goods, or, moreover, displaying wealth through luxury brands and other conspicuous lifestyle trends and habits as high-net-worth individuals avoid attracting unwanted attention, this is unlikely to have a long-term impact alone on luxury spending in Singapore,” Roberts said.
And most brands felt little impact from the case, with macroeconomic factors being a bigger worry. “We did not feel a direct impact from the incident. Since they would favor the ultra-high-end watches, which are items we do not solely focus on in our business. However, the market for watches has slowed down generally due to a weaker economy. Perhaps dealers who deal solely with ultra-high-end models will feel the ramifications.” said Nick Lim, director of Chuan Watch Collection Pte Ltd., a luxury watch specialist.
“The accused persons do not represent the entire watch buying or selling community. It’s hard for people with illegal money to even spend it at shops like ours. Many shops do not take cash nowadays. Only bank wire payments. And perhaps the sellers didn’t conduct their due diligence to a reasonable extent,” Lim said.
As the country awaits the return of high-spending Chinese visitors, domestic spending in Singapore could prop up the sector’s recovery, as it has in other countries over the last few years. According to Mintel’s Global Consumer survey, Singaporeans are more willing to spend as the world settles firmly into the post-pandemic era.
“Back in July 2020, 71 percent of Singaporean consumers said they would save or invest money left over after paying bills and buying necessities. Four years on, this dropped to 60 percent in March 2024,” said Huiqi Ong, senior consumer lifestyle analyst, Asia Pacific, at Mintel.
“Purse strings may be relaxing, but Singaporeans are still discerning about where they spend their money. If brands can prove their worth, consumers will spend. Seventy-three percent of Singaporean consumers said they thought it was worth paying more for products of high quality,” Ong said.
